Peek over the fence, time's running out.
Ever notice the ads in local papers for DirectBuy.com that promise factory prices on big-ticket items like regrigerators and furniture-not just the everyday stuff you get at Costco? Here's the Lowdown.
Recently you may have seen an advertisement on local television or in the Homesteader and other newspapers for a members-only buying club that promises "over 750 quality brand-name manufacturers and their authorized suppliers." At the top of the ad, big black block letters scream "Buy Direct. Save Big."
The ad says you can purchase from these manufacturers "without having to pay hidden store markups and unnecessary middleman costs." The company, billing itself as "The #1 way to buy direct for your home," invites you to call a telephone number or go to a Website to retrieve "Your Complimentary Visitor’s Pass Now!"
Hmmm. Big savings? Direct from the manufacturers? An invitation to an exclusive "members-only showroom"? If you are like me, you wonder, is this for real? Is it too good to be true? Wilton Magazine sent my wife Heather and me to investigate.
The company, "DirectBuy of Fairfield County," is located on Glover Avenue just off Route 7 as you head south into Norwalk. DirectBuy is a trade name for the local franchise of UCC TotalHome, a national buying club headquartered in Merrillville, Indiana. Founded in 1971, UCC TotalHome consolidates the buying power of its dues-paying members to buy goods directly from manufacturers ("UCC" stands for "United Consumers Club"). Think of each of the more than 90 locations in the U.S. and Canada as a large retail store that purchases goods at wholesale prices, but DOES NOT MARK THEM UP. As a member, you buy at wholesale, too.
DirectBuy primarily targets new homeowners, those remodeling an existing home, couples who are having a baby, and couples who are getting married. Heather and I recently purchased a home, got married, were planning on doing some remodeling, and hoping to start a family. That’s four for four! This place was for us.
We logged on to the Website (www.directbuy.net) and took the online tour. The site offered several examples of the magnitude of savings we could expect, like the Custom Solid Wood Kitchen Cabinets that members can buy for "Over 70% off Manufacturer’s Suggested Retail Price." Or the 2-piece All Leather Sectional Sofa that members can pick up for a song-like $1155 (versus $2566.66 MSRP).
The Website had information on the company, on franchising opportunities, and on the location of other centers. Notably, however, the site lacked information about the cost of membership. With nowhere left to go on the Website, Heather and I clicked "Make a Reservation." We signed up for a Wednesday evening orientation.
We thought our orientation would amount to a guided tour through a large warehouse facility, like Costco or BJs. Imagine our surprise then when we pulled into the Merritt Seven corporate office park on Glover Avenue. In the same location, you can find Vectron International, a manufacturer of telecommunications components, Hewitt Associates, the global HR outsourcing firm, and the offices of U.S. Surgical. You get a distinct executive-office vibe as the security guard welcomes you into the reception area. Kind of an odd place to buy furniture and kitchen cabinets, we thought.
That’s because at DirectBuy you don’t browse through aisles and aisles of merchandise, you browse through pages and pages of manufacturers’ catalogs. DirectBuy is an ordering facility, not a warehouse. Friendly people sit behind a desk and greet you. A dozen or so tables cover the carpeted floor. Pop music from the 80s drifts out from the speaker system. At the back of the room are several stacks filled with catalogs. Think of the reference section of the Wilton Library and you have an idea of what it looks like.
We expected to be greeted by Kelly Stockwell, the Open House Director at DirectBuy. Kelly was the man who confirmed our online reservation not once, not twice, but three times. Kelly sent us two follow-up emails and he called us to make sure we knew how to get to the place. He even offered to get us a baby sitter if we needed one! Talk about great service! But Kelly wasn’t there. He’d gone home earlier (our orientation began at 7:30pm). Another person greeted us. We chatted a bit and then Heather and I were shown into a room where we watched an explanatory video. A friend of mine joked that any sales pitch that goes to the videotape is peddling "hocus pocus." "It sounds like they’re trying to sell you a time share in Florida somewhere," he commented.
In this case, it was the complete opposite. No hocus pocus, but a "just-the-facts-ma’am" presentation. If anything, it was too literal-minded, showing example after example of members saving hundreds, sometimes thousands, of dollars on purchases, at discounts of 50 to 70% off retail. After fifteen minutes, Heather and I got the point. The video kept going.
Not everyone does get the point right away though. "It’s a very delicate sales process," notes Sunil Ippagunta, owner of DirectBuy of Fairfield County. With degrees in computer science and finance, Ippagunta bought the franchise in November 2002 and moved it from South Norwalk to the Merritt Seven location. (The franchise has been in Fairfield County since 1989.)
"We’re selling a concept, not a product," he emphasized. "We’re asking people to shop in a different way. One mistake in the selling process kills everything. Trust is key."
Why is trust so important? It all has to do with that library full of manufacturers’ catalogs. At the back of each catalog appear wholesale prices, the same prices that buyers from retail stores pay. And remember, those manufacturers are still selling those same products to traditional retailers up the street and around the block.
What if everyone knew what retailers were paying for merchandise? You’d get a lot of people marching into their local home appliances store saying, "I’m a member of DirectBuy and I know what that washing machine cost you. I demand a lower price!" That’s why trust is so important.
"Local dealers do not want to be low balled," Sunil Ippagunta notes. If it happens, retailers get miffed at DirectBuy. They call up the manufacturers who could, in turn, retaliate against UCC TotalHome. How? By pulling their catalogs from a location. The franchise can expel the guilty member as well.
To protect against such an occurrence, anyone who becomes a member signs a pledge to keep the wholesale prices confidential. "It is the responsibility of the local franchises to protect those manufacturer relationships" that are established at UCC TotalHome corporate headquarters in Indiana, Mr. Ippagunta says.
You may be thinking, "If DirectBuy buys goods at wholesale prices and then sells them to its members at the same prices, how do they make a profit?" Simple. Membership dues. How much are those membership dues? Here’s where the story gets interesting.
After more than thirty minutes sitting in front of the video screen, we still had not been told how much the membership dues would be. Heather did some calculations in her head and settled on a figure of $1000. I thought the dues would be more. The video eventually gave us a figure, but it was for a different franchise, the one on Long Island.
Finally, another representative from DirectBuy told us what we’d been waiting to hear. Membership at DirectBuy 1) Lasts for ten years and 2) Costs $4425! Wow. That was considerably more than we anticipated. But over the course of a decade, that’s an affordable four hundred and forty two bucks a year. But the trick is the dues are front-loaded in the first three years. You pay $3200 now—in installments—and from years four through ten, you pay only $175 a year. That took us by surprise. Thirty two hundred bucks is a lot of money to part with—even in four installments of eight hundred dollars. (There are other financing plans available, but our sales rep didn’t explain them to us.)
But how did the membership dues compare to our potential savings? Here’s what we were in the market for and what we figured we could save based on the examples given in the video: ItemEstimated? Savings Blinds/window treatments$1850 Sofa$1000 Bed (frame and headboard)$500 Rugs$800 Track lighting $500 Mattress$800 Total estimated savings$5450
That sure seemed like a great deal. But we still had to pay more than three thousand to get those savings. Subtracting the membership fee ($3200) from the estimated savings ($5450), we got a net savings of $2250. Over the years, we’d probably buy more stuff and increase our savings, but that night, it didn’t seem worth it to spend $3200 to save $2250. Heather and I were still on the fence.
If we could only look through some catalogs and see what DirectBuy had to offer, maybe we could make a better-informed decision. Trouble is, due to the sensitive nature of the wholesales prices, we were discouraged from browsing through the catalogs on our own. Our sales rep asked us what we might be interested in and brought certain catalogs over to us.
But he didn’t really know our taste. Moreover, we didn’t know the names of rug and furniture manufacturers. Like most people, we’ve heard of Sony stereos, Serta mattresses, GE refrigerators, and Weber grills. But brand name sofas? Not us. Quick: Who made that chair you are sitting in right now? You probably don’t know. And without knowing the names of the manufacturers, browsing through dozens of furniture catalogs has little value. How can you identify a good deal?
We needed time. Like many of you, Heather and I like to think before making larger purchases. The more something costs, the more time we need to think. Forking over three grand requires at least a couple of nights of sleeping on it.
But we couldn’t. We were told we had to decide on membership THAT NIGHT. Right there. Right then. Another surprise. And if we decided not to join, we would not be asked back for another seven years. Another surprise.
It was approaching 9:30 in the evening. Neither of us had eaten dinner and there was really no place for us to be alone so we could talk about this. Heather and I were feeling a little uncomfortable with these surprises at this point. Still, we were leaning towards joining. Then I looked at the contract and it read that we could cancel the whole thing within three business days! No one told us that either.
A couple of weeks later, I asked Sunil Ippagunta about the sales process. Why were key things withheld from prospective members until the night of the orientation, like that fact that you had to make an immediate decision? He told me that the national office in Indiana dictates sales policies. (UCC TotalHome sends representatives to each of the franchises to conduct sales training.) Plus, Mr. Ippagunta added that until you see the showroom and the video, you might not grasp the DirectBuy concept. Without that understanding, you really can’t make a judgment on this "style of buying." "What would you learn," he asked me, "if the advertisement had told you ahead of time that you had to decide that night? Decide on what?" He had a point. You need to see DirectBuy to understand it.
Revealing too much up front could harm DirectBuy’s chances of bringing in new members. (They get about 20 to 30 new members a month.) Think about it: If the advertisement in the paper read "Membership Dues $4425!" no one would ever show up. Something must be working for UCC TotalHome. It has been in business for thirty-plus years.
Referring to the DirectBuy concept, Mr. Ippagunta said, "Either you like it or you don’t like it. We don’t use high-pressure sales tactics. If you are not interested, we say ‘Thank you.’ No one chases you out the door to convince you to reconsider."
Others disagree. Type in "UCC TotalHome" and "Complaints" into Google and you’ll find plenty of angry folks who call UCC’s sales tactics "high pressure."
In fairness, though, we all know that squeaky wheels are very vocal and shout their complaints on the message boards of the World Wide Web. Satisfied customers, however, are quiet customers, rarely broadcasting their pleasant experiences on the Internet.
"We have no unhappy members," Sunil Ippagunta states. "If you are unhappy, we will work it out with you. We can work out any situation." By the way, DirectBuy has a "satisfactory record" with the Connecticut Better Business Bureau (they joined in May 2003).
In the end, Mr. Ippagunta’s words are this story’s takeaway message: Either you like it or you don’t like it. In order to save money, some of you may be only too happy to adopt DirectBuy’s style of buying. Some of you may find DirectBuy’s membership dues too high. Others may really enjoy browsing aisles and aisles of merchandise, rather than pages and pages of catalogs. Whatever your preferences, you now have some additional information to make that decision.
What did Heather and I do? We joined; then, after thinking about it some more, we canceled. When I called to cancel, I spoke to Sunil Ippagunta. He did not try to change my mind.
Peek over the fence, time's running out.
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